Just 140 startup deals were completed in the second quarter of 2020 in greater Los Angeles, according to the latest PitchBook-NVCA Venture Monitor released Tuesday. That is the fewest since Pitchbook and the National Venture Capital Association began tracking the data in 2014.

By comparison, there were 216 deals in the first quarter of 2020 and 210 during the second quarter of 2019. Total capital invested in the last quarter was cut in half from the frenzied first quarter of 2020, though investment was slightly ahead of the last quarter of 2019.

"While we continue to see a lot of opportunities, we have slowed down," said Eric Manlunas, founder & managing partner of Wavemaker Partners, a cross-border, early-stage firm headquartered in Los Angeles and Singapore. "It's a function of being defensive and of raising the bar."

Top deals included SpaceX's $346 million round, Aspiration's $135 Series D, and Service Titan's $74 Series E.

Meanwhile, there were just seven exits among local startups, the fewest since 2017. They included Inari Medical, an Irvine company that develops medical devices, which went public in May, and Apple's acquisition of Next VR, which records live events to be experienced in VR.

The local slowdown mirrors one seen nationally in the past quarter as the coronavirus moved dealmaking online and forced portfolio companies to focus on reducing their burn rate by cutting costs and shelving expansion plans. 2020 is on track for the fewest number of exits since 2011.

"With all that said, the impact on aggregate VC activity was hardly apocalyptic," wrote the authors of the report. "Much of the slowdown occurred during the early part of the quarter, when uncertainty over COVID-19's impact on the economy was at its height. After the initial month and a half of exercising caution, triaging, and focusing primarily on stabilizing their own portfolio companies, VC investing began to pick up in May."

Here are three takeaways from the report:

Fundraising Activity: Bigger is Better

Through the first half of the year, U.S. VCs closed 148 funds totaling more than $42.7 billion, which has already surpassed the full-year total for every year of the decade except 2016, 2018 and 2019. VC mega-funds ($500 million+) have been especially prolific in 2020 with 23 closed so far — nearly equal to the full-year number for 2019. This uptick in outsized funds drove the 2020 median fund size back over $100 million for the first time since 2007, and also contributed to a spike in the average fund size to $300.9 million.

Notable large funds that closed this quarter include General Catalyst with a $2.3 billion vehicle and a trio of Lightspeed Venture funds each over $890 million. Much of the success of established VCs has to do with their positive past performance and name recognition, which has been particularly helpful in a period when no face-to-face meetings are taking place.

First-time funds have seen a noticeable drop in new closed funds through Q2 2020, only raising $1.5 billion across 14 vehicles. This is likely due to an inability to capitalize on existing investor relationships, and it doesn't look like first-time fundraising activity will rebound in 2020, as economic uncertainty could encourage LPs to cut down on new allocations to VC, especially to unproven managers.

Exit Activity

By quarter's end, exit counts showed the extent of the steep decline that began with the onset of COVID-19 in March.

Only 147 exits closed in Q2, worth $21.2 billion. It's hard to measure these figures against 2019 given the massive IPOs that closed last year, but exit values are pacing to drop back towards levels seen pre-2017. Given the exit market provides the release valve to the massive amount of capital that has built up in VC, without a functioning pathway to liquidity, the whole industry could suffer.

On the IPO front, there was some positive momentum toward the end of Q2 with companies outside of the biotech industry or special purpose acquisition companies (SPACs) completing or filing for public listings. As an example, the Vroom IPO valued the car selling platform at just over $2 billion, which is especially notable as the automobile space has been significantly impacted by the pandemic, potentially implying that the IPO window could be open for a wide swath of startups.

Although the pandemic's effects on potential liquidity haven't yet reached the dire levels we saw from 2008 through 2010, the next couple of years still hold plenty of uncertainty that may further depress activity.

Investment Activity

Venture deal activity slowed in the second quarter with $34.3 billion invested across 2,197 deals, a 23.2% decline in deal count compared to Q1 2020.

While angel activity stayed relatively steady, completed seed deals saw a massive slowdown in Q2. It's also unlikely that 2020 will see the third consecutive year of early-stage investments exceeding $40 billion, as investors reevaluate portfolios and shore up balance sheets for the quarters to come.

Investors have also doubled down on portfolio companies as follow-on financing activity heavily outweighed first-time financings during Q2. Unexpectedly, there has not been a drop in late-stage activity with deal count tracking at a higher pace than 2019. 57 late-stage mega-deals ($100 million+) closed this quarter, bringing the total of late-stage mega-deals to more than 100 so far in 2020, easily on track to surpass the 175 closed in 2019. These high figures can be attributed to some sectors realizing newfound growth and capitalizing on capital availability while other sectors experienced disruption to growth and needed to raise unplanned rounds to weather the market downturn.

Nontraditional participation did not subside through Q2, either, as corporate VCs participated in 26% of all U.S. VC deals, a new high. PE firms have been investors in 13.9% of VC deals, a higher level than any previous full-year figure.